No surprises from new Chinese bank chief Yi Gang

China’s new central bank governor, US-educated Yi Gang, has promised policy continuity and financial stability.

Yi Gang, China’s new central bank governor.

China’s new central bank governor, US-educated Yi Gang, yesterday promised policy con­tinuity and financial stability.

As the country’s government digests massive political restructuring ordered by President Xi Jinping, it sent a clear signal through the appointment of Mr Yi, deputy governor of the People’s Bank of China for a decade, that it intends to avoid surprises in economic policy. The yuan is thus set to trade within a limited range during 2018.

Mr Yi, 60, succeeds the highly respected veteran banker Zhou Xiaochuan, who was governor for 15 years. He takes over as the country merges its bank and insurance regulators, delivering the central bank greater authority.  “The chief task at present is to implement stable monetary policy and to promote financial reforms and open up inter­nationally, while maintaining ­financial stability,” the new governor said yesterday.

The latter indicates the high priority he accords tackling rising corporate debt, about which the government has faced widespread concerns, including from international agencies that last year downgraded Chinese sovereign ratings.

ANZ Research forecasts that China’s overall debt-to-GDP level is likely to peak in 2020 at ­almost 260 per cent. Deleveraging will continue under Mr Yi, but not sharply enough to threaten this year’s 6.5 per cent GDP growth target.

Mr Yi yesterday vowed that economic reforms would be unveiled in the lead-up to the annual Bo’ao Forum in April, which will this year be attended by Mr Xi.

He said last month the bank would explore ways to bring shadow banking and real estate and internet financing within its prudential policy framework.

Ten days ago, Mr Yi said: “China’s monetary policy should be mainly based on the domestic economy and financial situation. We need to consider it comprehensively.”

The new bank chief, who was also head of the State Administration of Foreign Exchange that has been responsible for imposing tough capital controls, gained a business degree at Hamline University in St Paul, Minnesota, a doctorate in economics from Illinois University, and taught at Indiana University. After returning from the US in 1994, he co-founded the China Centre for Economic Research at Peking University.

Fluent in English, he has widespread international contacts with economists and financial policymakers. He said after his appointment yesterday: “I feel peaceful and solemn now, as the mission is holy and glorious.”

He is understood to have a strong relationship with Liu He, Mr Xi’s chief economic adviser, who was yesterday appointed one of four vice-premiers for the next five years.

Mr Yi, who has played a key role in turning the bank from a socialist planning agency into a more modern agency permitting a greater role for markets, is expected to promote the further internationalisation of the yuan.

He was responsible for implementing in August 2015 substantial international exchange rate flexibility for the currency. But the PBOC is not an independent institution. Its core policies, and especially fresh initiatives, must obtain approval from the party leadership, chiefly through the Leading Group for ­Financial and Economic Affairs formally chaired by Mr Xi, but in which Mr Liu is the leading actor. Mr Yi has served as one of Mr Liu’s deputies for the past four years.

David Malpass, the US Treasury Undersecretary for International Affairs, described Mr Yi as “a very strong technical leader with lots of skills”, adding that the US anticipated “a strong dialogue with the leaders that China designates”.

Mr Yi has been especially concerned about inflation, writing an influential essay in 1990.